Public Comment & Hearing - WS-21182A-25-0171 - Foothills Water & Sewer, LLC

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Arizona Corporation Commission 33 min 8 agenda items transcribed 3 days ago official recording ↗

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What is the purpose of the Arizona Corporation Commission hearing on WS‑21182A‑25‑0171?

Charles Haynes 0:01

right let's go ahead and go on the record and good morning everyone welcome to the arizona corporation commission this is the time set for the hearing in the matter of the application of arizona water company pursuant to ars sections 40-285 40-301 and 40-302 for authority to issue long-term debt securities in an amount not to exceed 100 million dollars and to pledge its assets and connection therewith The docket number is W-01445A-25-0191. I'm Administrative Law Judge Charles Haynes. I've been assigned to preside over this matter, and I'll start by taking appearances of the parties, beginning with the applicants.

Megan Grable 0:46

Thank you, Your Honor. Megan Grable from Osborne-Maladon on behalf of Arizona Water Company. With me at council table is its Vice President and General Counsel, Robert Speer. With me in the audience is its President, Fred Schneider, its CFO, Kevin Rogers, and I believe remotely participating is Mr. Nick Liu, the Vice President of Regulatory.

Charles Haynes 1:08

Okay, I don't see anybody inside the... At least online, I don't show anybody else being in here. So if he's on the way, if we're expecting him, are you expecting him?

Megan Grable 1:17

He did say he would participate, but we can proceed without him. Okay. He might cop on.

Charles Haynes 1:22

All right. And on behalf of the Utilities Division.

Sean Botkin 1:25

Sean Botkin on behalf of the Utilities Division. And with me, I have Travi Phan from the Utilities Division as well.

Charles Haynes 1:33

All right. Very good. Thank you, everybody. And to start with, are there any procedural matters that have cropped up since we had the procedural conference only a couple of days ago?

Sean Botkin 1:41

No.

Charles Haynes 1:42

All right. Very good. All right. In that case, now is the time for public comment. Is there anyone present who would wish to provide comment with regard to the application before us this morning? All right. Hearing no takers, let the record reflect there was no one who wished to provide comment with regard to this application this morning. Okay, on to opening statements. Ms. Grable or Mr. Spear.

Megan Grable 2:05

Thank you, Your Honor. This matter concerns, among other things, Arizona Waters Company's application for authority to incur $100 million in long-term debt over a period of six years and the waiver of the statutory limitations on short-term debt issuances. The company would very much like to thank commission staff for the time they spent working on this financing application and for the staff report. which the company supports in all but one respect, the recommendation to place an interest rate cap on short-term borrowings. The company and staff discussed that issue after the staff report was docketed, and staff has agreed to remove the recommendation. As a general matter, the company does not support placing interest rate caps on any debt issuance, but has agreed to the cap on long-term debt issuances here to be consistent with the company's last financing authorization.

Megan Grable 2:51

Placing a cap on short-term debt borrowings, however, is concerning for three reasons. First, unlike long-term debt, which has a fixed interest rate, short-term borrowings have variable interest rates that change daily, and the company has no control over what that rate will be on any given day. The interest rate could be below the cap on a Friday and above it on a Monday, and the company would not be able to timely cure any lack of compliance with the order. Second, an interest rate cap is intended to protect customers from high interest rates. That Arizona Water's short-term debt is not included in the company's capital structure for rate-making purposes, so it has no rate-making impact that would raise debt costs for customers.

Megan Grable 3:30

Simply put, a cap on short-term debt for these reasons does not serve the purpose of the cap. And finally, placing an interest rate cap on short-term debt is inconsistent with the Commission's last financing authorization for Arizona Water Company, which only capped the interest rate on long-term borrowings. For these reasons, we respectfully ask that his honor issue a recommended opinion and order that adopts the staff report's recommendations except for the interest rate cap on short-term debt.